The Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America (R-CALF USA) has been broadening the scope of its legal efforts. In recent days, there have been developments in three different lawsuits they have initiated.
The lawsuits are the Montana lawsuits against the beef checkoff, the complaint filed last year against the four major beef packers and a new lawsuit filed in Washington, D.C. against USDA involving the checkoff system.
In district court in Montana, R-CALF’s legal partners, Public Justice, took a page out of the environmental and endangered species activist groups who sue the government and then get the government to pay their legal costs. Those groups have used the Equal Access to Justice Act to apply to the court to get their legal costs paid for. R-CALF is doing the same. That means that ranchers and farmers, along with all taxpayers, would pay R-CALF for trying to eliminate all checkoffs.
The way the law is structured, the group suing the government does not even have to win their case or wait for the suit to be finally resolved. They only have to win part of the case and they can get payment in interim stages before appeals are even completed.
In this instance, R-CALF lost the case and is in the process of appealing to the Ninth Circuit Court of Appeals. They filed an extensive appeal at the end of September. The actual reimbursement comes from the Social Security trust fund.
In a checkoff-related case, R-CALF, with Public Justice, the same activist legal organization handling the Montana case, filed suit in the District Court of the District of Columbia against USDA. The claim is that USDA did not follow proper procedure in working out the memorandums of understanding with the qualified state beef councils. Those memorandums further formalized procedures that had been followed to ensure compliance with the 1985 checkoff enabling legislation. R-CALF claims rulemaking processes and public hearings should have been followed.
Another one of R-CALF’s legal forays did not work out so well. Last year, with the help of a Park Avenue/Chicago law firm, they brought suit against the four major packers, alleging that the packers conspired to fix fed cattle prices violating antitrust laws. The courts had consolidated the R-CALF cases with several others and assigned them to the Minnesota district court.
The judge in the Minnesota court said that he was dismissing the case, “Because Plaintiffs have not pleaded their direct evidence with sufficient detail and because they have not pleaded parallel conduct sufficient to support an inference of a price-fixing conspiracy.” The opinion referred to “little evidence” regarding the alleged conspiracy and noted that the complaint resorted to “group pleading” regarding the market’s reaction.
A major contention in the suit was that packers had conspired to cut slaughter volumes to force cattle prices down. But the judge evidently had done his homework. His opinion notes that the most specific allegations all relate to 2015, when the major packers reduced slaughter volume. It also noted that the complaint said little about the ensuing years when packer volumes increased.
Of course, the reason volumes dropped was cattle supplies had dropped, mainly due to drought. Prices went up in 2014 and part of 2015 largely because of that tight supply. Prices went down in 2015 when cattle supplies recovered, and packers closed plants. R-CALF alleged prices declined due to packer collusion to reduce slaughter, buy fewer cash cattle, coordinate their procurement, buy more imported cattle and curtail processing or close plants.
The judge also concluded the “confidential witnesses” in the case provided not enough detail, lacked proof of their allegations and wouldn’t reveal what companies they worked for. The two witnesses also alleged conflicting collusion theories, further casting doubt on the case.
The court concluded there was a “natural explanation” for the packers reacting like they did to the markets, cattle supplies and the nature of the packing business. There was a logical reason for “parallel conduct.”
Cattle-Fax’s CEO Randy Blach showed some data for the recent Texas Cattle Feeders convention that is relevant to this case. Cattle slaughter dipped to its lowest point in 2014 (24 million) and 2015 (23 million). Even more pointedly, packing capacity utilization hit a low point of 92 percent in 2015, compared to 105 percent now.
The packers weren’t cutting slaughter to make money; they were beating the bushes for cattle. Blach also pointed out that the low capacity utilization and lower cattle supply led to packers closing plants in 2015. In fact, Blach said there is strong demand now for high quality beef both here and abroad. But a major constraint on herd expansion long term will be packing capacity. — Steve Dittmer, WLJ columnist
(Steve Dittmer is the author of the Agribusiness Freedom Foundation newsletter.)
